Northamptonshire County Council is at risk of ‘insolvency’ due to financial crisis, claims district council

DDC's offices

Published:11:00Thursday 05 January 2017

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Northamptonshire County Council’s financial position is ‘grave’ and it is at ‘substantial risk’ of becoming insolvent, another authority has claimed.

Daventry District Council (DDC) is set to discuss its consultation response to the county council’s draft budget, medium term financial plan and council plan, at its strategy group meeting next Thursday.

The draft response, which could be altered before being approved by councillors, sets out a series of concerns DDC has about the county’s budget and planning. It is accompanied by a report to be seen by the district councillors.

The report states: “Due to a combination of failures to deliver previous savings and further cost pressures, NCC has great challenges in balancing its budget.

“It is also running is reserves at a very low level.”

DDC says it appears as though the county council only avoided running out of reserve money this financial year by topping up its budget with capital receipts. This would normally be unlawful, but NCC is taking advantage of a temporary permission from the Secretary of State for local authorities to use capital receipts in this way.

In order to continue using money this way, the Government would need to extend that permission, and NCC would need to have more capital items it can sell.

DDC’s report states: “Overall the financial position can only be summarised as grave, with it being hard to escape the conclusion that NCC is at substantial risk of being unable to meet its financial obligations as they fall due i.e. technical insolvency.

“It was the failure of NCC to have credible plans to balance its budget which caused its external auditors to give NCC a failure on its ‘value for money’ assessment.

“Since that time, NCC’s own assessment of its ability to deliver its planned savings for 2016/17 has not improved.

“This conclusion about NCC’s financial fragility applies now, and with greater force as time proceeds.”

Despite the cost cutting being done by the county council, there remains an unfunded £20 million deficit predicted for 2018-19 and following years.

DDC’s response says NCC entered the 2016/17 financial year with £22.1 million in earmarked reserves and £12 million of general reserves; and that NCC’s projected general reserves at April 1 2017 would still be £12 million, and the earmarked reserves £8.3 million. This assumes all the savings laid out in the budget and plan are achieved.

DDC’s response to this level of reserves and the £20 million projected deficit is: “It therefore appears that NCC faces a material risk of being unable to meet obligations when they become due i.e. it would technically be insolvent.”

Daventry also criticises NCC’s proposals for a county-wide unitary authority – a single council taking on the powers of the county, districts and boroughs covering all of Northamptonshire.

DDC states: “DDC is convinced that it is essential that local government remains local. Making local government more remote would simply fuel public distrust and disengagement, which in the long term is destructive of social value and social cohesion, and imposes costs in managing people who are increasingly disaffected.

“This is also a lesson from the June 2016 referendum on the UK’s membership of the European Union. People, including voters from each district in Northamptonshire, voted for power to be taken closer. The message of that result for local government should not be missed.”

Leader of Northamptonshire County Council Heather Smith said: “Now is not the time for any council to retreat into self-interest. We need to work together putting aside the organisations and structures which currently exist to find the best way of delivering public services for the best possible value for money.

“The proposal to create a unitary authority would ultimately mean the abolition of all councils in Northamptonshire, the county council included, and the creation of a single unitary, which all financial modelling shows would deliver the best value for money for the taxpayer.

“Given austerity is here to stay and the challenges we are facing particularly in delivering health and social care, it is essential that we look to reduce the cost of all local council services going forwards.

“We have always and will continue to deliver a balanced budget and the suggestion that we do not have credible plans to deliver the required savings is misinformed and disingenuous at best.”

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